Ministers have tabled a series of amendments to the legislation and have dropped proposals to change the way campaign spending by organisations other than political parties was defined.
Commons Leader Andrew Lansley made the concession after talks with the National Council for Voluntary Organisations (NCVO) which had been a prominent critic of the Transparency of Lobbying, non-Party Campaigning, and Trade Union Administration Bill.
The Government had sought to bring in changes that would align the test for third parties with party campaign expenditure, restricting spending "for election purposes" but charities, campaign groups and blogs warned the law could be interpreted so widely it could hit their work.
The Government proposes to go back to the situation under existing legislation, which defines controlled expenditure as spending "which can reasonably be regarded as intended to promote or procure electoral success".
Mr Lansley said: "I heard what charities and voluntary organisations had to say. While we always were clear that we had no intention of preventing them campaigning on policies and issues as they always have, I wanted the Bill to be as clear as it could possibly be."
TUC general secretary Frances O'Grady said: "The problems with this Bill have not gone away as it still limits campaigns against extremist parties, breaches the privacy of trade union members and fails to open up lobbying. If ministers think that opposition will now melt away, they have another think coming."